14 August 2024
TOMCO ENERGY
PLC
("TomCo"
or the "Company")
Proposed Redemption of
Greenfield's 10% Membership Interest in TSHII
TomCo Energy plc (AIM: TOM), the US
operating oil development group focused on using innovative
technology to unlock unconventional hydrocarbon resources,
announces that the Company's wholly owned subsidiary, Greenfield
Energy, LLC ("Greenfield"), entered into an agreement on 12 August
2024 (the "Side Agreement") with Tar Sands Holdings II, LLC
("TSHII") and Endeavor Capital Group LLC ("Endeavor"), which holds
90% of TSHII's membership interests, with respect to the proposed
redemption of Greenfield's 10% membership interest in TSHII for an
aggregate purchase price of US$1,575,000 (approximately £1,234,000)
(the "Proposed Redemption") under a proposed redemption agreement
("Redemption Agreement"). TSHII, Greenfield and Endeavor
concurrently entered into a Second Amended and Restated Operating
Agreement (the "Revised Operating Agreement") to facilitate a
buyout of TSHII's interests by a third party buyer, IRRX (as
described further below).
Pursuant to the terms of the Side
Agreement, both TSHII and IRRX (defined below) have agreed not to
terminate an existing lease between AC Oil LLC ("AC Oil"), a
wholly-owned subsidiary of Greenfield, and TSHII (the "Lease"), and
to negotiate in good faith with Greenfield with respect to entering
into an additional lease for mining rights on land owned by
TSHII (the "Additional Lease"). Accordingly, Greenfield
should be able to continue to pursue its existing tar sands
development project and potential in-situ well programme, subject to
securing the requisite additional funding and permitting going
forwards, post completion of the proposed
transaction.
The Proposed Redemption stems from a
recent approach to Endeavor by Integrated Rail and Resources
Acquisition Corp. (OTC: IRRX) ("IRRX") expressing interest in
potentially acquiring 100% of TSHII by way of a merger. IRRX
is a blank check company formed for the purpose of effecting a
merger, share exchange, asset acquisition, stock purchase,
reorganisation, or similar business combination with one or more
businesses with a particular focus on natural resources, railroads
and/or railroad logistics companies or any combinations
thereof.
The Proposed Redemption is
conditional on the prior approval of TomCo's shareholders pursuant
to the provisions of Rule 15 of the AIM Rules for Companies and the
net proceeds will be utilised to settle the group's outstanding
trade creditors and provide additional working capital.
Background Information on TSHII and Existing Lease
Arrangement
TSHII is a private US company formed
by Utah-based Endeavor in which Greenfield acquired a 10%
membership interest in November 2021 for a total consideration of
US$2m. Until 31 December 2023, Greenfield also held an option
to potentially purchase Endeavor's remaining 90% membership
interest in TSHII for certain additional cash consideration.
Such option had been extended and varied several times. TSHII
owns approximately 760 acres of land and associated rights and
certain non-producing historic infrastructure, plant and equipment
in Uintah County, Utah, USA (the "Site").
In addition to the 10% membership
interest held by Greenfield, AC Oil entered into a lease ("Lease")
with TSHII in respect of approximately 320 acres of the Site (the
"Lease Area") for an annual rental of US$320, together with a 12%
of net sales royalty per barrel of conventional oil, gas or sulphur
produced and removed from the Lease Area.
The Lease grants AC Oil the
exclusive right to explore, drill and mine for, and extract, store,
and remove oil, gas, hydrocarbons, and other associated substances
on and from the Lease Area, together, inter alia, with the right to erect,
construct and use such plant and equipment and infrastructure as
required. The Lease is for an initial term of 10 years and will
continue thereafter for so long as any oil, gas or other
hydrocarbons are being produced from the Lease Area or drilling
operations are being prosecuted or as the parties may
agree.
For the twelve month period to 31
December 2023, TSHII incurred an unaudited loss after tax of
approximately US$25,000. In the Company's audited annual
report and final statements for its financial year ended 30
September 2023, the group's carrying value for its 10% membership
interest in TSHII was approximately £1.64m.
Principal Terms of the Proposed Redemption
Redemption Agreement and Side
Agreement
The Proposed Redemption is
anticipated to be consummated by a Redemption Agreement to be
entered into between Greenfield, Endeavor and TSHII for the
proposed redemption by TSHII of Greenfield's entire 10% membership
interest in TSHII immediately following receipt of the approval of
TomCo's shareholders at a duly convened general meeting.
Following such redemption, TSHII plans to complete a merger
transaction with IRRX and its affiliates pursuant to a business
combination agreement and related documents, entered into on 12
August 2024, subject to NASDAQ exchange regulatory approvals, the
approval of the transaction by the shareholders of IRRX and the
satisfaction or waiver of other customary closing
conditions.
By way of the Side Agreement entered
into between Greenfield, Endeavor and TSHII on 12 August 2024,
subject to TomCo's shareholders' consent, Greenfield (a) has agreed
to waive any of its rights to prevent Endeavor selling its 90%
membership interest in TSHII to IRRX and (b) has granted to TSHII
the irrevocable, unrestricted and unconditional right to redeem
Greenfield's 10% membership interest for an aggregate cash
consideration of US$1,575,000 and the promise to negotiate terms
for the Additional Lease. The consideration shall be
satisfied as to US$100,000 on execution of the Side Agreement,
which is non-refundable, with the balancing US$1,475,000 (the
"Second Tranche Funds") to be held in escrow pending receipt of
TomCo's shareholders' approval, all pursuant to the terms of the
Redemption Agreement.
In addition, TSHII and IRRX have
committed (a) not to terminate the Lease and (b) to use best
efforts to negotiate in good faith to enter into the Additional
Lease to provide mining rights for Greenfield on land owned by
TSHII, save for that part occupied by an historic refinery which is
currently intended to be optimised and reactivated by IRRX (or such
other entity established for such purpose), on customary terms but
specifically involving: a lease withrights and access to mine
tar sands, and a right to set up a processing plant for tar sands.
The board of TomCo ("TomCo Board")
firmly believes that IRRX's intentions for the Site will not
conflict with Greenfield's existing plans, with potential scope for
close co-operation for mutual benefit.
The agreement contains certain
representations, warranties and indemnities between the parties of
a type commonly found in agreements of this nature. In the
event that TomCo's shareholders' do not approve the Proposed
Redemption, TomCo would need to secure alternative funding to
satisfy its group's working capital requirements. There can
be no guarantee that alternative funding can be secured on a timely
basis or as to the terms of any such alternative
financing.
Revised Operating
Agreement
The Revised Operating Agreement has
been entered into by Greenfield, Endeavor, and TSHII in respect of
TSHII in order to provide exclusive management rights to Endeavor
for a limited period and for the limited purpose of facilitating
consummation of the proposed merger transaction between TSHII and
IRRX. Such rights shall become null and void in the event (i)
the merger agreement is terminated; or (ii) TomCo fails to secure
the requisite shareholder approval. In such event, the
operating agreement existing immediately before the Revised
Operating Agreement shall be reinstated. The agreement
contains certain representations and warranties from Greenfield to
TSHII and Endeavor customary for an agreement of this
nature.
General Meeting
In light of its size, the Proposed
Redemption, which is unanimously recommended by the TomCo Board,
constitutes a fundamental change of business pursuant to the
provisions of Rule 15 of the AIM Rules for Companies, and is
therefore subject to the approval of TomCo's shareholders at a duly
convened general meeting. Accordingly, the Company will
shortly make a further announcement with respect to the publication
of a circular incorporating a formal notice of general meeting and
customary salient information with regards to seeking such
shareholder approval which, once published, will be made available
on the Company's website at www.tomcoenergy.com.
In the event that TomCo's
shareholders' approval is not forthcoming, the proposed transaction
will terminate and the TomCo Board would need to secure alternative
funding to satisfy the group's working capital requirements.
There can be no guarantee that alternative funding could be secured
on a timely basis or as to the terms of any such alternative
financing and the TomCo Board strongly believes that it is in best
interests of the Company and its shareholders as a whole to exit
from its minority interest in TSHII for wholly cash consideration
whilst retaining access to the Site and mining rights via the
existing Lease and proposed Additional Lease, which will enable the
Company to continue to pursue its tar sands development project
subject to funding and permitting
Suspension of Trading on AIM
Further to the Company's
announcement of 28 June 2024, trading in the Company's ordinary
shares on AIM will remain suspended pending successful completion
of the Proposed Redemption, and receipt of the Second Tranche
Funds, which will then enable finalisation of the Company's
unaudited interim results for the six-month period ended 31 March
2024 (the "2024 Interim Results"). Accordingly, it is
currently expected that suspension from trading will be lifted upon
publication of the 2024 Interim Results shortly following receipt
of shareholder approval and completion of the Proposed
Redemption.
Commenting today, Malcom Groat, Chairman of TomCo,
said:
"Whilst it is clearly disappointing that we have been unable
to secure funding to procure 100% of TSHII, despite a number of
extensions to our previously agreed option arrangement with
Endeavor, the Proposed Redemption, if successfully concluded, will
enable us to exit our minority investment and provide funds to
settle outstanding trade creditors and sufficient working capital
to finalise and release the group's 2024 Interim
Results.
Furthermore, the planned negotiation and entry into of the
Additional Lease will enable us to continue to pursue our tar sands
development project and potential in-situ well programme subject to
securing the requisite additional funding and permitting in due
course."
Enquiries:
TomCo Energy plc
Malcolm Groat (Chairman)
+44
(0)20 3934 6630
Strand Hanson Limited (Nominated Adviser)
James Harris / Matthew Chandler
+44 (0)20 7409 3494
Novum Securities Limited (Broker)
Jon Belliss / Colin Rowbury
+44
(0)20 7399 9402
For further information, please
visit www.tomcoenergy.com.
The information contained within this announcement is deemed
by the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended by virtue of the Market
Abuse (Amendment) (EU Exit) Regulations 2019.
